A case of mud, money and corporate intrigue

Updated 8:05 am, Wednesday, September 26, 2012

It's a story of international intrigue and secret blueprints, with allegations of corporate spies and clandestine document drops at a kitchen table.

While it has all the makings of the next "Mission Impossible" movie, it doesn't involve any thing as glamorous as microchips or the access codes for America's nuclear arsenal.

It's a battle over mud pumps.

The stakes, though, are no less significant to the companies involved. This week, a state district judge granted a temporary restraining order against Houston-based Mud King Products, which sells replacement parts for the oilfield services industry.

A Mud King rival, National Oilwell Varco, also based in Houston, sued on Friday, claiming Mud King employees engaged in an espionage scheme to steal designs for mud pumps - motors that are used to pump special chemicals known as drilling mud into and out of wells. Mud King then sold the pump designs to a Chinese company that made cheap knockoffs from them, the lawsuit contends.

While it may seem like a minor dispute, it speaks to the changing nature of the global energy business. As international competition has intensified, U.S. service companies like National Oilwell have responded by developing new technology to keep an edge over foreign rivals.

"There have been suspicions about how some companies go about the function of competitive intelligence, especially when they are closely associated with a foreign government," said William Arnold, a professor of energy management at Rice University.

It's why many companies at the Offshore Technology Conference get edgy about people taking pictures of their floor displays. They worry that rivals - especially representatives of state-owned oil companies - will use the photos to reverse-engineer cutting-edge technology.

In National Oilwell's case, it was tipped off to the alleged scheme last month by an anonymous letter from a Mud King employee who felt the company's tactics crossed the line.

National Oilwell investigated and said it discovered suspicious emails between one of its employees and Freddy Rubiano, Mud King's quality manager. Rubiano had worked at National Oilwell for four years before being fired in 2010, the lawsuit said.

'The Inside Woman'

National Oilwell's security systems revealed an employee had accessed hundreds of secret blueprints, which was beyond the normal scope of her job. When questioned last week, the employee - identified only as "the Inside Woman" - confessed to working with Rubiano, the suit claims.

Mud King's attorney was unavailable for comment. National Oilwell's general counsel, Dwight Rettig, said the company doesn't comment on pending litigation.

Here's how the alleged scheme worked, according to the lawsuit:

Last summer, Rubiano called the Inside Woman and asked her for some details of a mud pump component. After she provided the information, he then asked her to get a copy of a secret blueprint, which she emailed to him.

Then, the scheme intensified. Rubiano would send the Inside Woman text messages requesting plans for specific mud pump parts using National Oilwell's internal identification numbers. The woman would then print copies "and leave them on Rubiano's kitchen table in exchange for cash compensation," the lawsuit said.

When Rubiano needed more cash to pay the woman, he turned to Mud King's chief operating office, Nigel Brassington, who authorized the payments, the lawsuit said.

Knockoffs from China?

Brassington, who didn't return my calls, also denied National Oilwell's claims in a court filing Tuesday.

Mud King provided the blueprints to at least one Chinese company that's now producing knockoffs of National Oilwell's pumps, the lawsuit claims.

In issuing a temporary restraining order Friday, State District Judge Alexandra Smoots-Hogan told Mud King to stop selling any mud pumps or parts derived from National Oilwell's designs and return all design documents to National Oilwell. A hearing on a temporary injunction is set for Monday.

Mud pumps may not be the stuff of Hollywood spy movies, but the case underscores the high stakes involved in almost every aspect of the world's relentless quest for oil.

Loren Steffy, loren.steffy@chron.com, is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Follow him online at blog.chron.com/lorensteffy, www.facebook.com/LorenSteffypage and twitter.com/lsteffy.